Updated April 14, 2008
Scope/Impact:
Obama’s proposals are not as aggressive, expansive or disruptive as Clinton’s proposals. Therefore, they are not as criticized by economists.
Main proposals:
- Create a $10 billion foreclosure-prevention fund (part of a $30 billion stimulus package) to help at-risk homeowners in cities hardest hit by foreclosures. This would be paid for through penalties under the Stop Fraud Act and/or bonds.
- Stop Fraud Act aimed at mortgage fraud.
- Create 10% mortgage-interest credit for homeowners who don’t itemize their income-tax deductions. This would impact as many as 10 million, lower-income homeowners by giving them approximately $500 in additional tax savings a year.
- Create rating systems for mortgage products and credit cards. The rating system would provide transparency to consumers regarding hidden costs, obligations, terms and interest rates.
- Frank-Dodd legislation
Theory:
Obama introduced the Stop Fraud Act a year ago but did not have much of a plan addressing the housing crisis until recently. While his plan has evolved over time, it is not well defined. For instance, he is not specific about how his $10 billion foreclosure-relief fund will be used. Critics argue it is a drop in the bucket anyway. Generally speaking, his proposals are aimed at creating a strong middle-class through tax credits and cuts, as well as creating more transparency in both the mortgage and credit-card industries.
Other aspects of plan as outlined on Obama's website and in speeches:
- Amend bankruptcy code so that a court can modify an individual’s mortgage payments and to create a medical-debt exemption
- Establish a Credit Card Bill of Rights that would prevent credit card companies from unilaterally making changes or increasing interest rates on current debt.
- Establish exemptions from some taxes and fees when a family is facing foreclosure
- Give a middle-class tax cut
Sources:
- Democrats address a Nevada issue: Foreclosures by Michael J. Mishak / Las Vegas Sun Politics (12/9/07) (Differences between Obama and Clinton)
- Presidential campaign issues: foreclosure by Sabrina Eaton / Blog.Cleveland.com (2/24/08) (Obama's plan critiqued)
- ElectionWatch: Clinton's Rate Foreclosure Freeze Could Cause 'Chaos' by Julia A. Seymour and Amy Menefee / Business & Media Institute (3/12/08) (Obama's proposal somewhat undefined)
- Candidates' Economic Plans Don't Add Up by Jennifer Parker / ABC News (3/27/08) (How will Obama's $10 billion fund be used?)
- Candidates' housing plans fall short by Lisa Lerer / Yahoo! News (4/3/08) (Both Obama and Clinton support Frank-Dodd legislation. Obama's plan aimed at strengthening the middle class)
